Is the Economy Really 'Booming' in
MassachusettsMIT Professor Lester Thurow Questions
Politicians Claims of Economic High Times

Massachusetts NewsBy John Pike

September 2--Lester
Thurow, professor of business management and economics at MIT, tells
Massachusetts News that the unemployment rate is much higher then we
believe. As a result, itís difficult for many workers to demand a higher
wage.

Although the official unemployment rate is 4.3
percent, and 3.1 percent for Massachusetts, Thurow says the actual rate is
much higher.

He says his main concern, however, is "the declining
wage rates the U.S. has been experiencing since the early 1970s."

The person in charge of the statistics in Washington
agrees with Thurow about the unemployment rate. He is Thomas Nardone, chief
of the division of labor force statistics within the Department of Labor. He
calculated for Massachusetts News what he says is a "marginally
better statistic" for representing the percent of people who want a job.

Nardone says a more accurate, national unemployment
rate for June is 10.4 percent, more than twice as high as the official rate,
which includes 5.2 million people who are not actively looking for work, and
3.4 million individuals who are involuntarily working part-time.

Bill Cheney, chief economist at Bostonís John Hancock
Mutual Life Insurance Company, says Thurowís analysis is correct. He
believes, however, the unemployment rate can be used as a gauge, showing
yearly trends. Although it is not known if the unemployment rate is 9, 11,
or 13 percent, in recent years it has been decreasing.

How Good Are the Jobs?

However, Thurow says not only is the unemployment rate
much higher, but the jobs that do exist are poor paying.

Recently newspapers have regularly published stories
telling us that employers cannot find workers for available positions, but
Thurow says, "When jobs are available, they are able to fill them. Some
employers report shortages of specific skills, but even these are relatively
infrequent. Usually, the employers complaining about skills shortages are
also employers who themselves do no training. No one should take seriously
employers who do no training but complain about a shortage of skilled
workers.

"The same reality can be seen if one goes out to buy
anything. I have not heard of anyone who wants to buy something but is told
a particular good or service is simply not available, or there is a long
wait until delivery because there is a shortage of labor available to
produce the good."

During this age of downsizing and cost cutting by
companies, perhaps there is less money available to train workers.

Household moving companies frequently turn away
healthy strong applicants who have not wrapped furniture in a pad before,
although one can learn to do it quickly. Construction companies sometimes
only hire those who have previously banged nails, and companies requiring
graphic artists demand new hires who understand the latest software,
sometimes recently invented, even though true artists know that excellent
graphic artists need to have a good eye and perception, where mouse skills
are of peripheral importance. And secretaries with impeccable English
language skills are often shown the door because they have not used Windows
98, but persons who do know it are hired immediately, even if they cannot
spell their own names.

Carolyn, 31, of Watertown, who did not want her last
name printed because she says she is embarrassed about being unemployed for
three months, believes todayís job market is "really tough." A 1991
University of New Hampshire graduate in social work, Carolyn applied for a
job to run a community center overseas, which she has done, but did not get
the job because she has experience doing everything they wanted except one:
selling beverages. "They want everything. They are looking for very specific
things. They said they had resumes from Ph.D.s for this puny little job."

Employers today are seeking very specific skills.
While Wang Laboratories, based in Lowell, was going down the tubes a few
years ago, they were advertising for help as workers were being fired left
and right.

Thurow says, "The value of experience is going down.
The 25-year-old is better qualified than the 55 year-old. The age of peak
earning is now between 30 and 40, when it used to be between 40 and 50."

A Raytheon spokesperson says the company today needs
about 600 engineers, but many good engineers who apply do not get hired
because they do not have the very specific skills the companies are looking
for.

Last month in Providence, 6,000 applicants turned out
for 1,500 mostly low paid retail positions at a mall, which will be opening
soon. Early last year a Mercedes-Benz factory about to open in the South got
100,000 applicants for about 2,500 openings.

Thurow says, "Good jobs today are flooded with
applicants. There are stories like that all over the country. If the new
hire gets fired from Mercedes-Benz, he does not have to worry because he can
always go back to his poorly paid, service sector job, of which there are
plenty."

Businesses are typically flooded with resumes for
career track jobs that pay living wages with benefits.

Recently stories have been printed about Bostonís
local financial institutions having trouble filling entry level, customer
service positions for mutual funds. The companies have even been asking
local schools to start teaching mutual-fund courses to train new hires.
These positions could be teleservice jobs paying about $12 hourly, requiring
skills most people learn by the 10th grade.

But Dom Deleo, an assistant director at the Boston
College Career Center says many recent Boston College graduates face "tough
competition" to get these jobs. "To obtain one of these entry-level
career-track positions at a financial institution, the recent graduate must
demonstrate he has a focus, a commitment towards financial services, such as
a college major or coursework in this direction, or an internship."

Maureen Curley Amaral, assistant vice-president of
employment at Massachusetts Financial Services in Boston, says a recent
college graduate without financial service experience would probably not get
an entry level professional job answering phones in customer service.

Cheney, at John Hancock, says the Boston area may have
particularly stiff competition for entry level financial service positions
because of the high number ofschools locally.

A bank manager standing outside the Burlington mall,
who did not want his name printed, says he needs to hire two tellers and
cannot find anyone, but is unwilling to hire an overqualified person
because, "They would just be angry at themselves if they had a job they felt
was beneath them. They could not do a job where they are not using their
brain, where once they did use their brain."

Another manager said he sometimes has a problem
getting people hired even when they are well qualified because the immediate
supervisor views the new hire as a threat to his own job security, so he
hires someone else with poorer credentials. "And personality plays much too
large a role in determining who gets hired."

Jobs In Manufacturing Have Been Lost

Thurow says the important point about todayís economy
is not the number of jobs (because there are plenty of low-paying service
sector jobs) but rather how many jobs are available that pay a decent living
wage. The number of those positions has been shrinking for decades. "People
are working, but not at the job they want to work. There are lots of jobs
with low wage prospects."

According to the Bureau of Labor Statistics, the 1972
average weekly earnings in 1982 dollars hit a peak of $315, then decreased
to just $255 in 1996, with a small rise since then.

Last summer an owner of a restaurant in Rockport
complained he could not find anyone to serve customers in his restaurant,
but he refuses to pay above minimum wage.

But even in these reputed "boom times," Thurow says,
"There is no need for durable goods manufacturers to raise wages to get the
labor they need. Tens of millions of individuals in what has become over the
last 30 years a low wage service sector, a sector that now pays wages
one-third below those in manufacturing, would love to move into higher wage
manufacturing jobs. As a result, when a manufacturer needs workers, he can
easily get them from the service sector without having to raise wages. We
will only be at full employment when gains in employment start to be more
equally matched by reductions in unemployment."

The decrease in wages over the last few years is why
some married women with even small children are forced to work to help
support their family, and many fathers have two jobs.

Numbers are Misleading

"Unemployment rates have become misleading indicators
of labor market tightness and of the pressure to increase wages," Thurow
told Massachusetts News.

Economists have long believed that as the unemployment
rate drops, there is a corresponding pressure on wages to increase, which
helps workers as long as inflation does not increase.

"In 1994 the reputed U.S. unemployment rate dropped to
six percent," says Thurow, "and many economists, including those at the
Federal Reserve Bank, said inflation would reemerge. It did not happen.
There were simply a lot more potential workers waiting to be employed than
the statistics indicated. From 1994 through the end of 1998, two million
people left the unemployment rolls, but employment grew by nine million.
This happened because seven million new workers entered the labor force
despite the fact the U.S. adult population was in a period of very slow
growth. Some of these potential workers were immigrants (legal and illegal)
and some were native born Americans who did not meet the Labor Departmentís
tests for being unemployed, but they were all in fact eager to take jobs
when jobs could be found. What was measured officially as a six percent
unemployment rate in 1994 would in reality have been closer to 11 percent if
all those who were actually willing to take jobs had been counted. A hidden
reserve army of the unemployed was holding wages and prices down."

The Bureau of Labor Statistics publishes reams of
unemployment statistics monthly; most of which never appear in mainstream
newspapers.

The essential factors for the calculation of the
official unemployment rate do not include people who have not found a job
and have stopped looking, and those who are working part time, but would
rather have a full-time job.

The official rate could be corrected but perhaps
politicians of all stripes would be hesitant to alter a statistic that
would, overnight, more than double the perceived unemployment rate.

In recent years legislators were unable to agree to
change the way the inflation rate is calculated, which most economists,
including Federal Reserve Chairman Alan Greenspan, say overestimates the
amount of inflation in the American economy. Some politicians were opposed
to changing the mechanics of determining the inflation rate because a few
government programs and private contracts, which are annually adjusted in
relation to the official inflation rate, would then get fewer dollars.
Politicians may be influencing the economic statistics.